Small-business Q&A: Online coupons have potential

Coupon site promotion has potential

Q: I recently opened a cupcake shop, but I'm not attracting much foot traffic. What do you think about bringing in business by offering a promotion through one of those online group coupon sites?

A: Online couponing is big these days, with various services providing businesses with a relatively easy and effective way to attract customers. The way it often works is simple.

You and the online coupon service design a discount coupon deal for the particular product or service you want to offer.

The coupon service then sends an e-mail to subscribers in your geographic market telling them about your deal. The e-mails can be sent to thousands of subscribers, so you reach a lot of potential customers.

Hitting the minimum

A minimum number of coupons have to be sold for the offer to go into effect, but the coupon deals are always very attractive, and reaching the minimum typically isn't a problem.

The coupon service only promotes one new deal a day, so all the focus is on your business the day your deal is featured.

It sounds like a winning way for any business to get the word out, but before you jump on the bandwagon, look at all the angles.

On the plus side, you will definitely reach a lot of potential new customers. You don't have to pay upfront for your coupon promotion; you only pay the coupon service a percentage of what you actually sell, so there's little risk of spending a lot of money on a promotion that doesn't work.

Could you run out?

On the flip side, think about your capacity. Would you be able to keep up with the demand if your coupon deal was a big hit? What if all those coupon holders came in at once and you ran out of cupcakes?

You don't want to risk generating negative buzz. You'll also be selling a lot of cupcakes for less than they usually cost, so be sure you can handle the temporary hit to your profit margin.

Your goal for a successful online coupon offer should be the same as for any promotion. You not only want to attract new customers to your shop, you want them to come back again and again - and pay full price for your cupcakes when they do.